US Airways Group, Inc.
today reported a first quarter 2004 net loss of $177 million, which is a
$105 million or 37 percent improvement over the first quarter of 2003,
excluding reorganization items associated with the company’s emergence
from bankruptcy. Reported earnings of $1.63 billion for the first quarter
of 2003 included unusual gains recognized in connection with the company’s
emergence from bankruptcy (see Note 5 for a reconciliation). Operating revenue for the first quarter improved to $1.70 billion from
$1.53 billion for the first three months of 2003, which is a 10.9 percent
improvement year-over-year.

“Our results underscore the need for further changes. While we are seeing
year-over-year improvement, we clearly have more to do to ensure long-term
success, and we must implement a new cost structure and a revenue plan
that allows us to return to profitability,” said Bruce R. Lakefield, US
Airways president and chief executive officer. “My immediate priority is
to communicate with labor leaders and other key stakeholders about our
next steps, and then quickly follow that up with negotiations and
implementation. With our dedicated employees, strong customer base, and
sizeable presence on the East Coast, US Airways has the tools to
successfully complete its transformation plan.”

System passenger revenue per available seat mile (PRASM) for the first
quarter 2004 was 10.24 cents, up 2.4 percent compared to the first quarter
of 2003. Domestically, system PRASM grew 1.4 percent. System statistics
encompass mainline, wholly owned airline subsidiaries of US Airways Group,
Inc., as well as capacity purchases from third parties operating regional
jets as US Airways Express. For US Airways mainline operations only, the
PRASM of 9.32 cents was up 1.5 percent.

System available seat miles (ASMs) were up 8.8 percent, while mainline
ASMs increased 6.8 percent during the first quarter. Revenue passenger
miles (RPMs) increased 12.5 percent for the full US Airways system, while
mainline RPMs increased 10.8 percent. The mainline passenger load factor
of 70.2 percent, which was the highest first quarter load factor in
company history, was 2.5 percentage points higher than the same period
last year and system load factor was up 2.2 percentage points to 68.2
percent. For the quarter, US Airways, Inc.‘s mainline operations carried
9.9 million passengers, an increase of 4.5 percent compared to the same
period of 2003, while system passengers of 12.7 million were up 7.7
percent. The first quarter 2004 yield for mainline operations of 13.27
cents was down 2.1 percent from the same period in 2003, while system
yield was down 1.0 percent to 15.01 cents.

“Our efforts to add regional jets and strengthen our network are resulting
in increased revenues,” said B. Ben Baldanza, US Airways senior vice
president of marketing and planning. “However, customers increasingly have
more options for low, simplified fares, resulting in strong traffic and
lower yields. Our transformation plan will capitalize on this market trend
by allowing us to profitably offer consistently low fares to our
customers.”

The mainline cost per available seat mile (CASM), excluding fuel, of 10.02
cents for the quarter, declined 3.4 percent versus the same period in 2003
(for a reconciliation, see Note 2 to the Selected Airline Operating and
Financial Statistics). The first quarter of 2004 included $8 million of
non- cash, stock-based compensation related to stock grants given to
employees of US Airways’ organized labor groups during the restructuring
process and $4 million related to the startup of MidAtlantic Airways
regional jet operations. During the Chapter 11 restructuring process, the
company also substantially restructured its aircraft obligations. As a
result of these items, taking aircraft ownership into account and
excluding the stock-based compensation and MidAtlantic expenses, CASM
excluding fuel improved 6.0 percent for the quarter.

The cost of aviation fuel per gallon, including taxes, for the first
quarter, was 99.40 cents (93.82 cents excluding taxes), up 5.0 percent
from the same period in 2003. US Airways’ fuel position is 32.5 percent
hedged for the second half of 2004 and 5 percent hedged for 2005. Hedges
for the second quarter were sold recently to lock-in a gain of $19 million.

US Airways Group ended the quarter with total restricted and unrestricted
cash of approximately $1.64 billion, including $978 million in
unrestricted cash, cash equivalents and short-term investments. The
company’s cash position reflects the impact of the $250 million prepayment
of the Air Transportation Stabilization Board (ATSB) loan in March 2004,
which reduced the outstanding loan balance to $726 million.

Excluding the $250 million ATSB loan prepayment and other seasonal changes
in restricted cash, US Airways achieved breakeven cash performance during
the first quarter.

“The company continues to make progress in reducing losses and improving
cash flow. However, our long-term success will be driven by our ability to
achieve competitive costs and implement our transformation plan,” said
Neal S. Cohen, US Airways executive vice president of finance and chief
financial officer. “It is simply stating the obvious, that no business can
sustain itself, compete and survive over the long-term if it is not
profitable, and our preference is to complete our restructuring on a
consensual basis.”

Other Highlights * Completed all requirements to formally join the Star
Alliance on May 4, 2004. Through the Star Alliance, business and leisure
customers will be provided a unique and easier travel experience on
fifteen of the world’s finest airlines with unparalleled access to the
most extensive airline network in the world. With the addition of US
Airways, the Star Alliance will serve over 750 airports in over 130
different countries. * Accepted delivery and began operating the first
72-seat Embraer 170 aircraft, paving the way for the launch of US Airways’
new regional jet division MidAtlantic Airways, with first flights from
Philadelphia and Pittsburgh on April 4, 2004. The Embraer 170 regional jet
is the first aircraft to offer full jet passenger comfort at regional jet
costs. * Improved operational reliability, completing 98.9 percent of all
scheduled flights, which was a company best. * Continued to employ new
technology to enhance customer service:—Increased revenue on
usairways.com by 32 percent compared to the first quarter 2003.—Enabled
multilingual and large party kiosk capabilities. Customers also can now
use kiosks for international check-in.—Continued to roll out
installation of self-service kiosks. By the end of the year, 565 kiosks
will be operational at 87 airports. * Enhanced onboard services:—
Upgraded Envoy Class service for all transatlantic flights.—Initiated
the ability to purchase in flight meals online. Expect full roll out to
Dividend Miles members by mid-summer. * Expanded international reach by
adding new nonstop service between Philadelphia and Glasgow, Scotland,
beginning May 2004.
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